In the third approach, Mian (1996) identifies that UBIs offer their tenants two mam categories of services (a) typical incubator services including shared office services, business a[r]
Trang 1O V E R V I E W O F B U S I N E S S I N C U B A T O R S A N D U N I V E R S I T Y B U S I N E S S
I N C U B A T O R S
Hoang Van Hai
College of Economic! A Business Adminislralion - TNU
S U M M A R Y
Business incubator is a special firm type set up with the aim at assisting young firms through start - u p periods when they are most likely to get failure Therefore, it is considered as an engine
of regions' development in terms of economic value and job creation and has become deeply around the world in recent years, especially in developed countries like United States, western virtually unfamiliar with communities in Vietnam In Ihe attempt of providing an overview of business incubators, in this paper, we first introduce basts knowledge ofthe special firm type and then briefly describe one of its existences in practice, university business incubators
Key words: Business incubators; University business incubators; Incubatees; Knowledge: Development
I N T R O D U C T I O N
Business Incubators (Bis) made its first
appearance in Vietnam in 2004 with the
establishment of a business incubator
affiliated with Hanoi University of Science
and Technology Currently, Vietnam has 47
technology incubators Overall, the incubators
have achieved s o m e initially encouraging
results in terms of n u m b e r of scientific and
technological enterprises incubated Some
typical examples can be mentioned are the
22 enterprises, centre for high-tech business
incubation (HBI) nurturing 4 enterprises and
support over 20 businesses, centre for
software business incubation of Q u a n g Trung
(SBl) nurturing 10 enterprises, and cenler for
high-tech business incubation of Hoa Lac
nurturing 25 enterprises T h u s , in some
extent, this firm type has gradually proved its
importance in r e g i o n s ' e c o n o m i c growth
alongside the other forms of enterprises
Basic information of business incubators, like
the definition, the history of development, or
the characteristics can be found in existing
literatures corresponding However, the
information is scattered in many papers instead
of one Based on the fact, this paper is a
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collection o f t h e basic informalion of business incubators drawn from corresponding literatures thus providing readers with an overview of what a business incubator might
be within a reasonable amount of time In the paper, we first introduce basis knowledge of the special firm type and then briefly describe one of its existences in practice, university business incubators
B U S I N E S S I N C U B A T O R
So far, in existing literature, there is no single definition of business incubators considered
as standard A definition, which is widely accepted, is defined by Hackett and Dills According lo Hackett and Dills (2004: p 57):
"A business incubator is a shared office space facility that seeks lo provide its incubatees ('portfolio-', 'client-' or 'tenant-companies ') -with a strategic, value-adding intervention system (i.e business incubation)
of monitoring and business assistance [ ] with the objective of facilitating the successful new venture development of the incubatees while simultaneously containing the cost of their potential failure.[ ] Furthermore the incubator i.s not simply a shared-space office facility, infrastructure and mission statement, [ ] it is also a network of individuals and organizations"[3 ]
Trang 2Aiming al providing a clear view of whal
business incubators might be, these following
definitions arc worth consulting
At the 1998 Helsinki workshop, a business
incubator was defined as'
'"A place where newly created firms are
concentrated in a limited space Its aim is to
improve the chance of growth and rale of
survival of these firms by providing them with
a modular building with common faciHlie.\
(telefax, computing facilities, etc.) as well as
with managerial support and hack-up
services The main emphasis is on local
development and job creation.^'
However, the definition seems focusing loo
much on physical aspects of incubator
operation (Benchmarking of Business
Incubators, 2002) [2] An alternative
definition concentrates on other services
offered by business incubators are provided
by the US National Business Incubation
Association (NBIA):
"Business incubation is a dynamic process of
business enterprise development Incubators
nurture young firms, helping them lo survive
and grow during the start -up period when
they are most vulnerable Incubators provide
hands-on management assistance, access lo
financing and orchestrated exposure to
critical business or technical support
services They also offer entrepreneurialfitrms
shared office services, access to equipment,
fiexihle lea.ses and expandable space - all
under one roof'' '"*
Broadening the definition of NBIA by
including some aspects like entrepreneur
training, mentoring and visibility, UK
Business Incubation (UKBI) defines business
incubators as:
''Business incubation is a dynamic business
development process Il is a term which
covers a wide variety of proces.ses which help
lo reduce the failure rate of early stage
companies and speed the growth of
companies which have potential to become
substantial generators of employment and
wealth A business incubator is usually a
property with small work units which provide
entrepreneurs at start-up and during the early stages af businesses Incubators provide three main ingredients for growing successful businesses - an entrepreneurial and learning environment, ready access to mentors and investors, visibility in the marketplace."^
The first incubator was established as the Batavia Industrial Cenler (BIC) in Batavia, New York, in 1959 However, the concept of providing business assistance services to early-stage companies is familiar with communities
in the late 1970s The business incubator concept was generally accepted in the 1980s, when the importance of small firms regarding innovation and growth began lo be recognized
in economic planning By early 1990s, there were about 200 incubators v\orIdwide Today, according lo an estimation of NBIA, there are about 7000 business incubators in the world In
2011 alone North American incubators nurture about 49 000 start-up companies, providing fijll-time employment for nearly
200000 workers and generating annual revenue of almost $ 15 billion
Although there are differences among varied incubators, the following characteristics are typically shared among better ones (Nohria et al., 2000):
• They maintain a spirit of enlrepreneurship
by enabling their incubatees (tenants) to have significant ownership and by prevenfing them from strategic, bureaucratic and organizational impediments,
• They offer preferred rates and terms from leading service providers, through allowing member companies to enjoy economies of scale For example, business incubators help start-up managers reduce opportunity costs spent for selling up basis infrastructure, finding, negotiating and contracting for each service needed,
They offer preferential access to a network
of companies For instance, a tenant can establish linkages with companies in its incubator's network under the help of the incubator to obtain advice, or recruit talented employees [5]
Business incubator models are formed from four main components (Hackett and Dills,
82
Trang 32004)[4] They are selection, infrastructure,
business support, mediation and graduation
Selection refers to decision on whether a
venture is accepted in the incubation program
Each incubator generally has its own criteria to
select its incubatees They may include work
experience and technical expertise of the
entrepreneur or the management team, the
properties of the venture's target market, the
properties of the product or ser\'ice and the
venture's potential profit.'" From reviewed
literature, Bergek and Norrman (2008)
indentify four selection strategies which vary
in different incubator's portfolios of incubatees
"Survival-of-the-fillesl and idea", the
portfolio will presumably contain a
considerable number of idea owners (or
upcoming entrepreneurs) with immature ideas
relevant to a wide range of fields,
• "Survival-of-the-fillesl and entrepreneur",
the resulting portfolio will be diversified, and
contains entrepreneurs/ management teams
who have strong driving force and represent a
broad set of ventures,
• "Picking-the-winners and idea", results in a
highly suitable portfolio which consists of
thoroughly screened ideas within a quite
narrow technological area-often stemmed from
the research of highly ranked universities,
» "Picking-the-winners and entrepreneur",
the portfolio includes a few handpicked and
thoroughly evaluated entrepreneurs,
commonly with ideas relaled to research areas
of a nearby university.[8]
Infrastructure includes localities, office
facilities and administrative service (Bergek
and Norrman, 2008) [8]
Business support regards coaching/ training
activities aiming at developing the incubatees
(Bergek and Norrman, 2008) [8] The
business support services generally contain
entrepreneurial training and business
development advices The service also
includes general business matters such as
accounting, legal matters, advertising and
financial assistance (Bollingtoft and Ulhoi,
2005; Chan and Lau, 2005; Laikalka, 2003,
Lyons and Li, 2003; Mian,
1996)'"-Mediation concerns on how the incubator connects the incubatees to each other and to the outside world (Bergek and Norrman, 2008) [8] Mediator is one ofthe important
"•'.When a firm is in the incubation program,
il is allowed lo be involved a network ofthe incubator which include potential customers, partners, employees, university researchers and financiers (cf Bollinglofl and Ulhoi, 2005; Clarysse et al., 2005; Hackett and Dilts, 2004b)''' From the network, incubatees can access resources which are vital for the survival of newly startup firms, such as knowledge and technology, financial capital, market related resources and human capilal (Begley et al., 2005; Bollingtoft and Ulhoi, 2005; Hindle and Yencken, 2004; Collmson and Gregson, 2003)"" This compensates for a shortage of established entrepreneurial networks of incubatees and reduces the uncertainty that incubatees experience (Peters et al., 2004; Smilor, 1987, von Zedwitz, 2003)'^'
Graduation refers to decisions regarding what circumstance incubatees should leave oul the incubation program (Bergek and Norrman, 2008) [8] It's difficult to find out the most reasonable answer to the question: When is a company ready to graduate? According to a report in 2002 of European Commission Enterprise Directorate General, a company can remain as a tenant in the duration from 3
to 5 years depending on how special an incubatee might be For example, some specialist types of tenants, such as biotech tenants, high-lech R&D and high-tech manufacturing can remain in the incubation program more than 3 year because of the longer product development In the same subject, another method worth consulting since it provides a clear view on what the graduation process might be In the method, a set of existing criteria is created based on factors such as having enough investment lo run business in next stages, requiring space beyond the incubator's capacity, or creating a complete management team (Cammarata and Kathleen, 2003) [1] Two following examples are used to illustrate for the method
Trang 4Hodng van Hai
Example 1
According lo Charles D'Agoslino, executive
director of the Louisiana Business &
Technology Center (LBTC) in Baton Rouge,
Louisiana, when evaluating graduation
process ofthe clients, his incubator bases on a
number of factors:
Have they followed their business schedule
Have they added the necessao' employees to
meet wilh growth objectives ofthe company?
Have Ihey completed a network of
advisors and professionals (eg , attorneys and
accountants)?
Have they started generating revenue from
sales?
Do they have adequate capilal lo run the
company for the next six months to a year?
Is the management team able to run the
company without incubator guidance?
Example 2
In the Center for Innovation in Grand Forks,
North Dakota, a tenant is ready to graduate
once it achieves two of the following
condilions:
• Reaches $ 1 million in annual sales
• Makes a successful public or private stock
of more than $500,000
• Exceeds the incubator's capability
• No longer has a tie wilh universities lo be
in a university incubator
A conclusion drawn from incubators'
graduation process is that whatever the time for
graduation is, the key is lo have a strong
rationale for deciding when a company should
run a business on its own and that rationale
should be in line wilh an incubator's mission
and focus (Cammarata and Kathleen, 2003).[ 1 ]
We have provided basic knowledge of
business incubators In the remaining of the
paper, we briefly introduce one of its
existences in practice named university
business incubators (UBIs)
UNIVERSITY BUSINESS INCUBATORS
In the existing literature regarding university
business incubators (UBIs), there is no
standard definition of the concept of UBIs
We can gel out here three ways to describe whal university business incubators might be:
In the first approach, Evans and Klofslen (1998), Radosevic (1995) '"" indicate that UBIs are set up by universities ready to accept a directly entrepreneurial role in generating and spreading scientific and technological knowledge
In the second approach, I ieydebreck et al (2000), Grimaldi and Grandi (2001)'"' mention that UBIs are institutions aiming*! nurturing new knowledge-based ventures through provision of services including space, infrastructure, communication channels, and information about external financing opportunities, etc However, stemming from their educational function, UBIs focus more
on the transfer of scientific and technological knowledge from universities lo companies
In the third approach, Mian (1996) identifies that UBIs offer their tenants two mam categories of services (a) typical incubator services including shared office services, business assistance, access to capilal providers, access to business networks, and rent breaks; (b) university - relaled services like faculty consultants, employment of students, improvement of reputation, library service, labs/ workshops, and equipment, computers, relaled R&D activity, technology transfer programs emplo>ee ducation and training, sports, and other social activities [7] Besides common characteristics sharing among business incubators UBIs have distinctive ones As indentified by Mian (1996), UBIs have fundamental characteristics
as following:
• UBIs' objectives come from interest of those who are states, local governments, or private sectors
Most UBIs are physically situated on or close to their respective sponsonng-universi^ campuses Being near university campuses offers UBIs advantages such as access to library facilities, student labor, technical equipment, and experts (Smilor and Gill, 1986) [10],
Governance and Policy Guidance- In general, all UBI facilities are managed by various types of boards with representative of
Trang 5university, stale, local government, and private
sector These boards make overall direction,
• Tenant performance Review- Formal and
Informal tenant performance reviews are
implemented periodically at UBIs This
process is based on criteria of dropouts,
annual sales, and employment growth
Institutional Support- Various UBIs
programs get benefit from their respective
university technology transfer programs,
research centers, and technology and business
development assistance centers
Staffing - UBIs employ different number
of administrative/elerical and professional
staff, depending upon the size, which is
reliant on the number of its tenants and nature
of each operation According lo a research
done by European commission in 2002, a key
efficient ratio between an incubator's staff
and its tenants is 1: 3 2 or 1: 5 0 Concerning
the nature of operation, a statistics of National
Council for Urban Economic Development
(1985), Washington, DC, can be served as an
example The statistics indicates that business
incubators employ 1.9 and 2.10 staffs in
average for administrative and consulting
work, respectively
• UBIs get funds from stale and support
from sponsoring university for both their
operation and mission of supporting the
growth of tenant firms,
• Technologies and Entrepreneur targeted
-the type of technologies targeted for
development is generally reliant on the
available resources at a particular facility The
types of targeted entrepreneurs such as
university related (students, professors,
alumni) or others, depend on incentives and
recruiting efforts Incentives mean UBIs
focusing on the characteristics of managers
which are in line with a particular facility like
entrepieneurs with technology idea relative to
the research area of respective universities
Recruiting efforts refers to the UBIs'
endeavor to seek talented entrepreneurs
Strategic Operational Policies-tenant
selection policy, tenant graduation policy,
intellectual property safeguards for tenant
firms, and the linkage with graduated firms
are considered key elements for a successful university business incubator
Services and Their Valucd-Added-There are two main categories of services: (a) typical incubator services, such as shared office services, business assistance, access to capilal providers, access to business networks, and rent breaks; (b) university -relaled services like faculty consultants, students' employment, improvement of reputation, library service, labs/ workshops, and equipment, computers, related R&D activity, technology transfer programs, education and training,
• Survival and Growth of Tenant Firms- The survival and growth of tenant firms are measured based on criteria like dropouts, annual sales, and employment growth.[6] The great advantage of being in UBIs' incubation program is tenant firms are more likely to access universities' knowledge, which may be in forms of patent, publications, meetings or conferences, licenses, joint ventures, contract research, consulting and personal exchange (Rothaermel and Thursby, 2005) [9] Nevertheless, since the knowledge is not free, tenant firms have to make payment for using the knowledge, and paying forms are reliant
on contractual agreements between both parties (Thursby, 2002, Zucker and Darby,
1996, 1998)"'' CONCLUSIONS Business incubator is the special firm type set
up wilh the aim at assisting young firms through support services, such as infrastructure, capital access, employee recruitment and training, during start -up periods when they are most likely lo gel failure Each incubator has its own incubation program which is different in terms of nurturing strategies; however, the program must include four main components including selection, infrastructure, business support, mediation and graduation University business incubator is one of BGs 'existences in practice Besides sharing common characteristics as a business incubator, knowledge transfer is a typical feature of UBIs due lo its close relationship wilh universities Business
85
Trang 6incubators and university business incubators [6] Mian, S (1996)" The university business both are regarded as main engine in regions' incubator: a strategy for developing new economic growth rescarch/technology-based firms", 7(2) 191 - 2 0 8
RI 1-l-RFNCFS ' ^ ' ^ ' ^ ' ^' ''^"^^ "Assessing value-added contributions
[1] Cammarala, Kathleen, St'//-/;iv//;(f//(()// Workbook
for liiisineis Incubators, NBIA Publications, 2003
of university technology business incubators to tenant firms" Research Policy: 325 - 335
[HI Norrman, C, & Bergek, A (2008)"lncubator best [2] European Commission FInlerprise Directorate practice A framework", Technovation, 2 8 ' 2 0 - 2 8
r : ? : l ' ! : t r ^ ^ ' " ^ -' '^^'"^^^ [9,Phi.lips,R.,2002,"Teehno.ogybusinessincubato.:
Incubators", February 2002
[3] Grandi A and Grimaldi, R (2005)"Busincss
incubators and new venture creation: an assessnn
how effective as technology transfer mechanism?", Technology in Society, 24 2 9 9 - 3 1 6
ofincubaling models" Tcdiiiovation, 25 111-121 [10] Rolhaemiel F., Thuby, M (2005) "University [4] Hackett, S , Dills, D (2004)"A Systematic incubalor firm knowledge flows: assessing their impan Review of Business Incubation Research", Journal of on incubator firm performance", Research Policy, Technology Transfer, 29: 55 - 82 34(2005), 305-320
[5] Hansen M Cliesbrough,H Nohria,N and Sull [11] Smilor, R., Gill, M.D Jr (1986) 'The New
D (2000) "Nctu'drkcd Incubations Hothouses of the Business Incubator: Linking Talent, Technology and New Economy", Harvard Business Review, 74-84 Kow-How", Lexington Books, Lexington, MA TOM TAT
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\iiie:
' " ' See in Benchmarking of Business Incubators, 2002' p 4-5
•"•*''' See in Norrman, C and Bergek, A (2008)"lncubalor best practice: A framework", Technovation,
2 8 : 2 0 - 2 8
"••' See in Norrman, C and Bergek A (2008)"lncubator best practice: A framework", Technovation, 28:
2 0 - 2 8
'"' " See in Grandi, A and Grimaldi, R (2005)"Business incubators and new venture creation: an
assessment of incubating models" Technovation, 25: 1 1 1 - 1 2 1
'• See in Rothaermel, F., Thuby, M, (2005) "Univeisity-incubator firm knowledge flows: assessing their impact on incubator firm performance" Research Policy, 34(2005), 305-320
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